Survey reveals cheapest average corporate PPA prices in Europe

Sweden and Spain respectively
have the cheapest average corporate PPA prices in Europe for wind and solar
electricity, according to BloombergNEF’s (BNEF) 1H 2020 European
Corporate PPA Price Survey.

The survey aims to provide pricing transparency and simplify the complexity around corporate power purchase agreements, or PPAs, helping buyers to understand this fast-growing market. It’s the first report of its kind, according to BNEF.

The survey finds that
the lowest price levels for onshore wind corporate PPAs in Europe are available
in Sweden at 30.50 EUR/MWh. Solar PV shows its lowest price levels in Spain at
35.30 EUR/MWh.

BNEF conducted the survey by looking at the minimum-maximum price range for the most common PPA scenario – a ‘base case’ – for both solar and wind across nine markets. Then it looked at how PPA prices change depending on three main adjustment factors: capacity, term length and contract structure.

PPA prices not static

PPA prices are not
static and depend on many variables, so there is never just one market price,
said BNEF.

However, with an understanding of the underlying power market and various adjustment factors, it is possible to arrive at a sensible range for a given PPA scenario.

At present, any publicly available information is generally anecdotal and project-specific, while the majority of PPA data is obscured by non-disclosure agreements. As no two projects are the same, this means available corporate PPA data have had limited usefulness.

Helen Dewhurst, an
analyst at BloombergNEF and the author of the report, said: “The very wide
range of results was particularly interesting, with the gap between the
cheapest PPA you might sign in Sweden and the most expensive PPA in the U.K.
being over 30 euros per MWh.”

Changes in PPA contract terms can have a significant impact on price. For example, the survey found that annual baseload contracts for round-the-clock power are between 1.5 and 3.5 euros per MWh more expensive on average than standard pay-as-produced deals that directly track renewable output.

The extent to which
volume has an impact on price generally increases in inverse proportion to
project size.

Term length is another
key determinant of corporate PPA pricing. In Europe, a 1.5-2.5 EUR/MWh premium
is typically charged for 15-20 year terms, compared with more standard
10-15 year terms.

This is a key distinction
between Europe and the US – the world’s largest corporate PPA market (with
40.4GW activity, compared to 9.8GW in Europe) – where longer deal terms attract
a discount.

Kyle Harrison, a BNEF analyst specialising in corporate sustainability, commented: “Nearly half of the world’s RE100 companies are based in Europe – we know the demand for clean energy is there. But for PPA activity to scale up to US levels, more light needs to be shined on regional nuances around contract pricing, structure and term length.”

Babalwa Bungane is a content creator/editor for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for five years. She has a great interest in social media due to its advantage of disseminating content.